Friday Reading: Buy I Bonds for 2013

By Harry Sit

Although I haven’t made the 2013 IRA contribution yet, I went ahead with buying my quota for $10,000 worth of I Bonds for 2013. You don’t have to wait until the end of the month if you want to earn a tiny bit of interest. You can schedule the purchase now. See the post from last year: How To Buy I Bonds On a Future Date in TreasuryDirect.

Paying Off Mortgage Versus I-Bonds by Michael at Long-Term Returns

All the love for I Bonds can’t outweigh a 4.38% mortgage on a rental property. I wonder if the mortgage can be refinanced down to below 3%? Maybe not for a rental?

***

REITs: A word of caution by Joe Davis at Vanguard Blog

I sold my REITs ETF, not because I read one article and I think they are too hot or overvalued but because I’m moving gradually toward a simpler portfolio. I used to have a foreign bonds fund, a microcap stocks fund, and a commodity futures fund. I trimmed those already.

***

The End of Estate Planning? by Joe at JoeTaxPayer

Is a trust a cool thing everyone has? I don’t have one. Maybe I won’t need one.

***

Inflation Hedges by Michael at Long-Term Returns

Investors do tend to look for inflation hedges because inflation is a huge enemy to one’s accumulated wealth. Here I disagree with the author about TIPS. TIPS prices day-to-day or month-to-month may not have a high correlation with inflation but the redemption values have a direct 1:1 relationship with inflation.

***

New Internet Banks Often Neglect ACH Transfers – Why This Is a Mistake by Ken Tumin at DepositAccounts.com

Not only new Internet banks. Old brick-and-mortar banks too! Having opened accounts at several different banks last year, I see the banks’ ACH transfer features vary greatly. A bank that doesn’t offer free, efficient ACH in-and-out with multiple linked accounts does not qualify as my primary bank.

***

Why Healthcare Costs Will Continue to Climb and My Healthcare Plan at I Am 1 Percent

I don’t agree with the author’s plan but I agree with his observations. We must stop giving a blank check to the health care industry. That means letting providers compete on price and effectiveness, instead of saying "whatever it takes; I’m not paying anyway."

***

Despite Promise, Federal Tax-Refund Debit Cards a No Go by Ann Carrns at New York Times Bucks Blog

I’m surprised by this sidebar bit of info in the article. Lower income unbanked taxpayers pay $150-$400 to tax preparers for doing their tax returns. Meanwhile we have higher income households buying tax software on sale under $50. It’s expensive to be poor.

2.2% Rewards Card $444 Bonus

Earn 2.2% toward travel on all purchases with Barclaycard Arrival World MasterCard. No caps and no foreign transaction fees. 40,000 bonus points if you make $1,000 or more in purchases in the first 90 days. $89 annual fee waived in the first year (40,000 bonus miles pay for 5 more years after that). Learn More

Software picked, likely related posts:

Posted on January 11, 2013 under News. Keywords: , , , , , .

Leave a comment

Comments

15 Comments on Friday Reading: Buy I Bonds for 2013

  1. J on January 11, 2013
     

    I’m skeptical that competition would bring health care costs down. Patients don’t always get to choose where they will receive care.

    A few years ago a teenager blew through a stop sign at 100mph and slammed into the driver’s side of my friend’s car. My friend was taken to the nearest emergency room and treated. He was in a coma for at least one day, and he had brain damage. During that time he could not choose the hospital that would treat him, nor could he approve or refuse treatment. The hospital charged about $100,000 for its services.

    A former co-worker had a cousin who was in a motorcycle accident. This cousin was in a coma for four days. Again, this patient could not choose where he would be treated, who would treat him, and what procedures would be done. The hospital charged around $40,000.

    Both men are alive today because of modern medicine, but the cost control was out of their hands.

  2. Harry on January 11, 2013
     

    J – Don’t always get to choose — true. But there are many more instances when patients do get to choose but they have the wrong incentive to choose more expensive treatments. To borrow something I heard on the radio yesterday, “The fact that we can’t do everything does not mean we should do nothing.”

  3. Jake on January 12, 2013
     

    Catastrophic cases like your friend’s are not common and make up a small portion of healthcare costs. In those cases, yes, you have no choice in care, but for all other cases, you do have a choice. Routine, elective surgery, medical tests, specialilist visits, minor procedures, etc.

  4. Akshay on January 13, 2013
     

    Can you suggest why you bought complete $10,000 of I Bonds limit for 2013 @1.76% now instead of waiting till Apr and then decide to buy in Apr or May to lock rate for next six months?

  5. Rabbmd on January 14, 2013
     

    Im sure he wanted to lock in the 1.76% risk free for jan-march. There is almost zero chance of the fixed rate going up this year, so unless you know another 1.76% risk free yield buying now makes a lot of sense.

  6. Harry on January 14, 2013
     

    Yes, I see no chance for the fixed rate to go above 0% in 2013. 1.76% composite rate for the first six months is acceptable to me. I will take whatever inflation adjustment is for the second six months. You can wait until mid-April to see what the inflation adjustment will be for the second six months. If it’s low, then what? Wait until November? What if it’s low again? I just want to get my quota and forget about it.

  7. John on January 14, 2013
     

    If I have I-Bonds and BND as part of my “Bond” asset allocation portfolio; would you recommend to invest in I-Bonds or BND and why?

  8. Harry on January 14, 2013
     

    John – I Bonds, because there is a limit on how much you can buy each year. If you don’t buy in one year, you can’t buy more later, whereas if you want more BND you can always buy more at any time in the future.

  9. Don on January 14, 2013
     

    J – Plus I think you may be missing something. In the many cases where competition/incentives could be implemented, the costs for those $100k and $40k stays could very well have already been lowered due to typical market forces. In the current environment, there would be no incentive to lower prices or drive efficiencies.

  10. Peter on January 16, 2013
     

    Are you planning on purchasing paper I Bonds with your 2012 tax return?

  11. Harry on January 16, 2013
     

    Yes, full $5,000 as I did last year. For others not familiar with it, here’s how: Backdoor to Paper Savings Bonds.

  12. Peter on January 16, 2013
     

    Thanks for the link. Great article!

    I remember reading about people not receiving their paper I Bonds due to rounding errors on their tax return. Do you know if this is still a problem?

  13. Harry on January 16, 2013
     

    Peter – Some people didn’t get the paper bonds for unknown reasons. No idea whether the problem at the IRS still exists. We do our best and hope for the best. If no bonds come, we still get the money back. All is lost is the interest on the money for about a month, which is very little these days.

  14. John on January 16, 2013
     

    Harry, wrt my BND and I-Bonds question, I was under the impression that BND prices change on a daily basis. So you can avail of the re-balancing and Dollar cost averaging. How would this be possible with I-Bonds?

  15. Harry on January 16, 2013
     

    John – Dollar cost averaging by itself is not a benefit if prices fluctuate but stay consistently higher (lower yield) than the alternative. Ultimately you make money in bonds from the interest. You don’t need all your money for rebalancing. A previous post showed it would take a 20% – 25% move in the stock market to change your asset allocation by 5% (i.e. sell 5% of your portfolio from bonds to buy stocks). If BND or I Bonds are your only sources of funds for rebalancing, leave 5%, or maximum 10%, of your portfolio in BND and the rest can go into I Bonds.

Tell me what you're thinking, but please don't spam. See comments moderation policy.